Net profit of 9M22 is 241 million yuan, YOY +187.26%
On October 20, 2022, the company released its report for the third quarter of 2022. The first three quarters achieved operating income of 5.311 billion yuan, YOY +32.80%, net profit of 241 million yuan, and YOY +187.26%.
Looking at a single quarter, the 22Q3 company achieved operating income of 2,001 billion yuan, YOY +27.46%, and achieved net profit of 91 million yuan to the mother, and YOY +293.92%. We expect the company's net profit to be 381, 7.48, and 1,038 billion yuan respectively in 22-24, and the corresponding EPS is 0.87, 1.71, and 2.38 yuan respectively. Referring to the comparable company Wind in 2022, the average PE value is expected 26 times. Considering the high growth characteristics of the company's eel business, we gave it 30 times PE in 22 years, with a target price of 26.10 yuan to maintain the “buy” rating.
The eel & feed business both contributed impressive performance
The company achieved good growth in revenue and profit in the first three quarters, mainly due to the continuous implementation of the volume of eel business released from the pond, and the rapid development of the feed business, especially special water products. 1) Eel farming business: The company continued to release eel ponds as planned. Q3 produced more than 2,400 tons of ponds due to adverse factors in hot weather, sold 5,819 tons in the first three quarters, contributed 494 million yuan in gross margin, stabilized at more than 30%, contributed more than 150 million yuan in net profit, and gross profit exceeded 160 million yuan, and ton profit exceeded 26,000/ton. 2) Feed business:
Sales of livestock feed amounted to 900,000 tons, an increase of 17% over the previous year, contributing 3.03 billion yuan in revenue. Sales of special water materials exceeded 150,000 tons, an increase of 21% over the previous year, contributing 1.43 billion yuan in revenue, and the total net profit of the feed business exceeded 100 million yuan. Furthermore, sales in the food business declined due to the impact of plant renovations.
Accelerate the commissioning of eel farming projects to support future growth
In terms of production capacity, the company's fixed assets and projects under construction were 1,774 million yuan and 758 million yuan respectively at the end of Q3, up 54.73% and 78.31% respectively. Among them, projects under construction increased 116.45% compared to the beginning of the year. The company has set up eel farming projects in Fujian, Guangdong, Jiangxi, Hubei, Guangxi and other places. Currently, the farming capacity has reached more than 30,000 tons per year, and the continuous growth of the company's production capacity is expected to support a sharp increase in the amount of ponds produced in the future. In terms of the amount of seedlings invested, expendable biological assets reached 848 million at the end of June, an increase of 198% over the previous year. 75 million new eels were added during this year's sowing season, an increase of more than 150% over the previous year, which is expected to help the rapid growth in eel ponds next year.
Eel industry chain integrator maintains “buy” rating
The company's eel farming technology is mature, and the advantages of upstream and downstream integration are obvious. It is expected to continuously integrate the domestic eel industry chain and achieve a rapid increase in market share. We maintain our profit forecast. The company's net profit for 22-24 is estimated to be 381, 7.48, and 1,038 billion yuan respectively. The corresponding EPS is 0.87, 1.71, and 2.38 respectively, and the target price is 26.10 yuan (previous value of 26.97 yuan), maintaining the “buy” rating.
Risk warning: risk of natural disasters, risk of epidemics, risk of fluctuations in raw material prices, uncertainty in farming business, eel prices falling short of expectations, food safety risks.